Tds on consideration paid to nri for property purchased
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
26 March 2015
The assessee has made payment to NRI for purchase of agricultural land. The seller has further invested sale consideration in purchase of agricultural land and is eligible for exemption u/s 54B of Income Tax Act, 1961.
However, assessee has not deducted TDS at the time of payment to NRI.
As the the Seller has made further investment, his tax liability is NIl.
Please suggest whether assessee is mandatory required to deduct TDS.
As the Tax liability of seller is Nil, whether benefit of section 201 (assessee in default) can be taken by assessee.
However, assessee has not deducted TDS at the time of payment to NRI.
As the the Seller has made further investment, his tax liability is NIl.
Please suggest whether assessee is mandatory required to deduct TDS.
As the Tax liability of seller is Nil, whether benefit of section 201 (assessee in default) can be taken by assessee.
27 March 2015
Section 194 IA applicable only when payment made to a resident transferor for immovable property other than agricultural land subject to the threshold limit.
Querist : Anonymous
Querist :
Anonymous
(Querist)
27 March 2015
We are talking about Section 195 of Income Tax Act, 1961 and not 194IA.
27 July 2025
Here’s a clear explanation for your query about TDS on consideration paid to an NRI for agricultural land purchase:
---
### Key Points:
1. **TDS on Purchase of Agricultural Land from NRI:**
* **Section 194IA** (TDS on immovable property) applies only to **payments made to resident sellers** for immovable property other than agricultural land.
* Since the seller here is an **NRI** and the property is **agricultural land**, **Section 194IA does not apply**.
2. **Applicability of Section 195:**
* For payments made to a **non-resident (NRI)**, TDS is to be deducted under **Section 195** on any sum payable that is chargeable to tax in India.
* Income from sale of agricultural land is **generally exempt from capital gains tax** (Section 10(37), depending on certain conditions) — but this depends on if agricultural land is situated in rural area or not, and other facts.
* If the capital gain is **exempt under section 54B** (as in your case, reinvestment in agricultural land), the seller's tax liability on the gain is nil.
* However, **Section 195 TDS is based on gross payment** and is **not waived** just because the seller claims exemption.
* So, **TDS deduction is mandatory** at the prescribed rate unless you get a certificate from the Income Tax department for lower or no deduction.
3. **If TDS was not deducted:**
* If TDS was not deducted while making payment to the NRI, **assessee (buyer) is liable as an assessee in default under Section 201**.
* The buyer can approach the Income Tax Department to get a **lower or nil TDS certificate** under Section 195(2) if they believe tax is not deductible or deductible at a lower rate.
* But unless such certificate is obtained, **TDS liability remains on the buyer** regardless of the seller's exemption.
---
### Summary:
| Situation | Is TDS Deductible? | Section Applicable | Comments |
| -------------------------------------------- | ------------------------------------------------------ | ------------------ | ----------------------------------------------------------------------------------------- |
| Payment to NRI for agricultural land | Yes | Section 195 | Mandatory to deduct TDS even if seller claims exemption under 54B. |
| Seller tax liability is nil due to exemption | No waiver | | Tax exemption does not relieve buyer from deducting TDS unless a certificate is obtained. |
| No TDS deducted by buyer | Buyer liable as assessee in default under Section 201. | | Buyer can face penalty and interest if TDS is not deducted and deposited timely. |
---
### What should you do now?
* Check if you can obtain a **lower or nil deduction certificate** from Income Tax Department under Section 195(2).
* If not, deposit the TDS now with interest and file the TDS return.
* Advise the seller to disclose the exemption while filing tax returns.
---
If you want, I can guide you on how to apply for the lower deduction certificate or calculate interest and penalties for delayed TDS. Would you like that?
---
### Key Points:
1. **TDS on Purchase of Agricultural Land from NRI:**
* **Section 194IA** (TDS on immovable property) applies only to **payments made to resident sellers** for immovable property other than agricultural land.
* Since the seller here is an **NRI** and the property is **agricultural land**, **Section 194IA does not apply**.
2. **Applicability of Section 195:**
* For payments made to a **non-resident (NRI)**, TDS is to be deducted under **Section 195** on any sum payable that is chargeable to tax in India.
* Income from sale of agricultural land is **generally exempt from capital gains tax** (Section 10(37), depending on certain conditions) — but this depends on if agricultural land is situated in rural area or not, and other facts.
* If the capital gain is **exempt under section 54B** (as in your case, reinvestment in agricultural land), the seller's tax liability on the gain is nil.
* However, **Section 195 TDS is based on gross payment** and is **not waived** just because the seller claims exemption.
* So, **TDS deduction is mandatory** at the prescribed rate unless you get a certificate from the Income Tax department for lower or no deduction.
3. **If TDS was not deducted:**
* If TDS was not deducted while making payment to the NRI, **assessee (buyer) is liable as an assessee in default under Section 201**.
* The buyer can approach the Income Tax Department to get a **lower or nil TDS certificate** under Section 195(2) if they believe tax is not deductible or deductible at a lower rate.
* But unless such certificate is obtained, **TDS liability remains on the buyer** regardless of the seller's exemption.
---
### Summary:
| Situation | Is TDS Deductible? | Section Applicable | Comments |
| -------------------------------------------- | ------------------------------------------------------ | ------------------ | ----------------------------------------------------------------------------------------- |
| Payment to NRI for agricultural land | Yes | Section 195 | Mandatory to deduct TDS even if seller claims exemption under 54B. |
| Seller tax liability is nil due to exemption | No waiver | | Tax exemption does not relieve buyer from deducting TDS unless a certificate is obtained. |
| No TDS deducted by buyer | Buyer liable as assessee in default under Section 201. | | Buyer can face penalty and interest if TDS is not deducted and deposited timely. |
---
### What should you do now?
* Check if you can obtain a **lower or nil deduction certificate** from Income Tax Department under Section 195(2).
* If not, deposit the TDS now with interest and file the TDS return.
* Advise the seller to disclose the exemption while filing tax returns.
---
If you want, I can guide you on how to apply for the lower deduction certificate or calculate interest and penalties for delayed TDS. Would you like that?
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